For manufacturers, emerging technologies have forever changed how products are made, service is delivered and business is conducted. Embedded technologies are enabling manufactured products to be more “informed;” new stakeholders with innovative products and services are entering the ecosystem; traditional supply chains are being disrupted through new channel options; and, above all, customers are demanding an ever-increasing level of customization, not just in products and services, but also across the entire procurement and product usage experience.
At the same time, manufacturers must still focus on the tried-and-true business fundamentals of profitably delivering products and services that meet customer needs. In short, the objective for manufacturers today is to use modern technology to do the same things in a dramatically more efficient and effective way.
From our experience, we have defined four mandates that manufacturers must master in order to excel at technology-led innovation:
Operational excellence: In light of what’s possible through the Internet of Things (IoT), and combined with increased customer demand for personalization, operational excellence has acquired a whole new meaning. Rather than focusing on incremental improvements, manufacturers must gear up for optimizing plant operations, leveraging intelligent products, enabling machine-to-machine collaboration and utilizing prescriptive analytics. An example is Mercedes-AMG, which compares historical engine test data with real-time sensor data during test runs to identify quality issues and take immediate action. The result: Significant time savings and less resource waste.
Agility: Today’s global supply chains are diverse, dispersed and complex, forcing manufacturers to adopt technologies such as mobility and cloud to enable greater visibility and control. Dow Chemical, for example, leverages cloud technology to generate tremendous visibility and flexibility across the value chain.
Innovation: The traditional integrated value chain is now broken into distinct chunks, as new players leverage emerging technologies to provide innovative products and services through newer business models. While product engineering and technology remain key targets for innovation, it’s becoming more important to also develop holistic strategies that connect the entire product, service and delivery channel, as well as improve environmental sustainability. Another key challenge is nurturing a culture of innovation.
Customer centricity: Manufacturers today have little choice but to make their products and services available across multiple channels and devices while providing omnichannel consistency in terms of customer experience, service and information access. Intelligent data mining and analysis of social media information, among other technologies, now make it possible for manufacturers to obtain an unprecedented 360-degree view of their customers’ behavior and needs.
Enabling Digital Transformation
Many manufacturers have taken an ad hoc approach to addressing these imperatives. Many have implemented point solutions, while others are still grappling with where to start and what is relevant to them and their customers and partners. However, we believe that to assess and build effective digital capabilities, manufacturers need to take a more structured, holistic approach.
We have developed a comprehensive framework that guides manufacturers in developing a roadmap to digital excellence. Manufacturers can begin by assessing their current state within the four mandates by answering a set of questions that address three key attributes for each mandate: strategy alignment, process execution and performance management. Our scoring mechanism enables manufacturers to rate themselves on their digital capability for each mandate, using weights determined by our past experience and that roughly represent the sum total of management efforts required, implementation costs and perceived benefits.
Scoring for each mandate is performed by rating the three parameters, and then applying the corresponding parameter percentage to calculate the weighted rating.
Note that while this framework represents a good starting point, we recommend that manufacturers tweak it to match their industry sector, target customers, geographic location, etc. Further, manufacturers can use this framework to either devise a transformation strategy themselves or hire a third-party to do so. Either way, we recommend they follow an approach that incorporates three phases:
Assess: Current-state assessment and competition benchmarking; future-state definition.
Plan: Gap analysis, prioritization and business case preparation; roadmap preparation.
Once manufacturers fully embrace digital business adoption, they can realize the resulting performance boost. A phased implementation roadmap, coupled with an adequate change management strategy, is critical to ensuring a successful transformation.